Are farmers exempt from paying sales or use tax on vehicles that are licensed to operate on the highways?

Generally, no. Farmers are only exempt on equipment that is directly used in farming, such as tractors, planters or combines that plow the fields, plant the crops or harvest the crops. Motor vehicles (automobiles, trucks, etc.) registered for use on the highways and used to transport seed, fertilizers, chemicals or finished products are taxable. APV’s would only qualify for exemption if they are being used primarily (more than 50 percent of the time) directly in farming (similar to the way a tractor is used).

There is an exception to the general rule and that is a specifically designed vehicle that contains a tank, operated with a power take-off unit (PTO) that is used to spray liquid fertilizers, pesticides, herbicides, etc., on farm lands and crops. This vehicle is generally owned by someone who is hired by a farmer to provide a farming service and must operate on the highways since it must travel from farm to farm. If the tank/sprayer is not operated by a power take-off unit, the vehicle is subject to the tax while the tank/sprayer unit is not. In this case, the dealer must provide a separation of the amounts between the vehicle and the tank/sprayer unit.

Another exception would be vehicles and trailers that are primarily used to prevent illness to farm livestock for sale, or to prevent contamination of livestock products for sale. For example, a trailer primarily used to inoculate swine and cattle for sale, or transport sick animals to and from quarantine areas would not be subject to the tax. Also, a trailer owned by the farmer to primarily transport feed to the farm that would otherwise be contaminated if shipped commercially would be exempt. Vehicles owned and used by egg producers to ship eggs from the farm to market under refrigerated conditions would not be subject to the tax.